There are many debt relief options that you can pursue to achieve freedom from all your credit obligations. One of them is known as debt management. It is actually part of credit counseling but it is when the counselor takes a more active role in solving your credit problems.
To make debt management plan successful, you have to understand the whole process first. There is no one formula to get out of debt. What works for others may not be true for you. In order to avoid wasting time, money and effort, you must understand your debt situation, your ability to pay off your dues and the financial plans that you have after debt relief. This is an important consideration regardless of the debt relief program that you will choose to pursue.
Consumers who can benefit from hiring a credit counselor
While everyone can use credit counseling, not all of them will be qualified to pursue debt management. There are certain characteristics of consumers who will benefit from this debt solution. Here is a list of situations that will tell you if you are a good candidate for debt management.
Those who need professional intervention.
Some people can work on their own debt relief program but others may not have the time to attend to that or they are simply too intimidated to talk to creditors. If you can relate to the latter, then you will benefit from the expertise of a credit counselor. These professionals will help you through their expertise, experience and their current working relationship with your creditors. That should increase the possibility of a faster agreement between you and creditors.
Those who find it difficult to control their spending.
If you think that it will be very difficult for you to control your bad spending habits or your credit card use, debt management can help you deal with that. The credit counseling phase that you will go through in the beginning will educate you of the proper financial management skills that will keep you from incurring any more debt. Not only that, creditors will freeze your credit card accounts as soon as you enroll them in a debt management program. That will keep you from using them.
Those who can afford to pay a maximum service fee of $50 a month.
There are debt management companies who give their service for free but you have to know that a lot of them usually has a monthly charge. It is no more than $50 a month anyway so if you can spare this amount, then you will not have any problems with debt management.
Those who need to maintain a good credit score.
This debt relief program is one of those that will not harm your credit score. There is no debt reduction here so your creditor does not have reason to put a negative remark on your report. Not only that, the debt management plan will be backed by a reliable credit counselor and that will assure creditors that you will stick to your payments.
Those who have the money to pay for all their debts.
Since there is no debt reduction, it just follows that you need a stable and steady monthly salary. Although your debt management plan will show a lower monthly payment scheme, you will still end up paying for everything that you owe. If you can afford that, then you are pursuing the right debt solution.
Those who can wait for 3-5 years before being debt free.
A lower monthly payment without debt reduction means two things: the counselor has negotiated a lower interest rate and you have a longer payment term. The former is not really a guarantee but the latter is. You need to be prepared to wait for 3-5 years before you can complete your payments.
Those who have the right type of debt.
Lastly, you need to have the right type of debt. This program can accept mostly unsecured debts like credit card debts, medical bills, utility bills and other personal loans. This program will not be able to do much for your secured loans.
If you can relate to most of these conditions, then you can consider debt management as a way out of debt. The credit counselor will confirm this to you when you meet up with them.
Important information about debt management
Since debt management involves a debt professional, you have to know how you can find legitimate and reliable ones. You can start your search by looking at reputable organizations and viewing their members. You can gauge the qualifications of a company by knowing the standards of the organization in accepting members. You can start with the NFCC (National Foundation for Credit Counseling and the AICCCA (Association of Independent Consumer Credit Counseling Agencies).
Here are other important details about debt management that you need to know.
It focuses on restructuring the payment plan of your unsecured debts.
It gives you a single monthly payment plan that allows you to send one payment to the counselor who will take charge of distributing your money to various creditors.
It provides you with a payment schedule that is approved by the creditor.
It saves you from the hassle of negotiating with creditors as counselor will take over this task.
It stops collection calls from happening since the counselor will also take over communicating with them.
It keeps your payments organized and updated.
It helps you create a budget plan that should work alongside your debt management plan.
It improves your credit score over time.
Here is a video from the NFCC that discusses the basic concepts about debt management.